08 March 2012

Are We Headed for a Cashless Society?

In the NewsOne word in the news recently caught our attention: “unbanked.” Perhaps it’s because we’re used to hearing the term “unchurched” to refer to people who do not belong to or participate in a church, but we knew immediately that unbanked referred to those who don’t have bank accounts and don’t participate in the banking system. The word caused us to playfully wonder if those who used to have a bank account could be the “debanked” and former church attendees could be the “dechurched.” Then, if they return, are they the “rebanked” and the “rechurched” respectively? Carrying the analogy in a more serious direction, we noted that as church people ourselves, we often consider the unchurched to be missing out on something important. Should we think about the unbanked as missing out on something important as well, or are there some advantages to not using a financial institution?The word “unbanked” appeared in a couple of news stories about the trend of society toward becoming “cashless,” meaning that instead of transacting purchases with actual paper currency and metal coins, we would all use some form of electronic transaction, even for such minor purchases as a candy bar or a subway token, with there being no option for paying with cash.Obviously, with credit and debit cards as well as checks, many of us are already participating in cashless transactions, but the projection is that using technology known as near-field communications (NFC), even your local morning coffee vendor would have a payment device at which you would simply wave your enabled card or smartphone to pay for small-value purchases, which wouldn’t require even the inputting of a PIN or signature.Even loans to friends will be able to be made using your smartphone. (“There’s an app for that!”)What’s more, many of us are already used to using “virtual currencies” which require no hand-to-hand exchange, such as frequent-flyer miles, rewards points, Bitcoins, Ithaca Hours and Facebook Credits.Among the benefits of a cashless economy are the big savings to governments (which no longer have to print bills and mint coins), the elimination of currency counterfeiting (but likely replaced by computer-currency counterfeiting), the removal of the risk of carrying large sums of cash (replaced by the risk of account theft or theft of the currency card or app or whatnot), and the speeding up of checkout lines where consumers no longer have to enter PINs or sign invoices and where clerks no longer have to make change.The technology to go cashless already exists, but the unbanked could have difficulty in such an economy. The unbanked include older people who survived the Great Depression and have a deep distrust of all financial institutions and therefore do not use them, young people who may not have established financial practices, those who have declared bankruptcy and are trying to live without credit, low-wage earners who may not be able to maintain the necessary minimum balance to keep a bank account active, the extremely poor who have no need for the banking system as they try to survive their day-to-day lives, illegal immigrants who don’t have the proper identification to open a bank account and criminals who avoid using financial institutions because law enforcement officials can track their actions through their accounts. (We don’t need to accommodate the latter group; they will no doubt find other ways to hide their earnings.)A fully cashless economy may be coming, but if it is to work, ways will need to be established to include every consumer.Of course, all of this presumes a government monopoly on currency, which may or may not continue, and could become less of a factor as virtual currencies multiply.More on this story can be found at these links:Is Cash Really Going to Disappear? FoxBusinessThe Allure of a Cashless Society. CGAPWhat If Cash Sales for Houses Were Banned? Carpe DiemThe Crypto-Currency. The New Yorker (the full article is behind a subscription wall, but this link will take you to the abstract, which is available to all and gives the gist of the article)Ithaca Hours. Wikipedia

The above comes from Wired Word which is a cool curriculum used by a class I teach on Sunday mornings at 9 am at St. John's Presbyterian Church, 5020 West Bellfort Ave, Houston, TX 77096. You are invited to drop in this Sunday for this interesting conversation.